Like the struggle between Sherlock Holmes and Professor Moriarty above the Reichenbach Falls, the clash yesterday between George Osborne and Ed Balls was both furious and quite possibly irrelevant. Unless Angela Merkel has a dramatic change of heart in the very near future and rides to the rescue of those eurozone member states that are close to default, the statistics over which the Chancellor and shadow chancellor squabbled will be swallowed up by the implosion of the euro, the financial equivalent of Conan Doyle's "dreadful cauldron of swirling water and seething foam".

Not since January 2004, when Tony Blair faced the knife-edge vote on student top-up fees the day before the publication of the Hutton Report, has a government experienced a comparable 48 hours. Yesterday's Autumn Statement consigned the nation to years of gloom - gloom that may be radically compounded, as Osborne admitted, by recession on the Continent. Today, the public sector unions have confronted the Coalition with the biggest national strike for a generation, and a ferocious challenge to its authority. The Government has to be seen to win the face-down, maintaining core public services at an acceptable minimum level, never squandering the impression of being in control.

The inventory of grim figures in yesterday's statement and the accompanying forecasts by the Office for Budget Responsibility was extraordinary: the Government will have to borrow £111 billion more than it expected only nine months ago; the existing pay freezes for public sector workers will be followed by a one per cent cap on future increases; 710,000 public sector jobs will be cut by 2016/17; the rise in the state pension age to 67 will be brought forward by eight years to 2026; real household income is likely to fall by 2.3 per cent this year, apparently the highest annual drop since 1945.

Most striking of all, the Chancellor set spending totals for two years beyond the plan envisaged in last October's spending review, announcing that total managed expenditure will fall by 0.9 per cent a year in 2015/16 and 2016/17 - that is, cuts beyond the next general election. On last night's Newsnight, Danny Alexander, the Lib-Dem Chief Secretary, appeared - remarkably - to sign up his own party to this post-election austerity plan, too. Like most of his viewers, I imagine, Jeremy Paxman could scarcely believe what he was hearing.

Yet perhaps Mr Alexander, toiling away in the engine room of the Treasury, has been bitten by reality more deeply than most politicians. He and Mr Osborne know how bleak it is, and how much more bleak it will be. I think Barack Obama's "Yes We Can'' marked not the beginning but the end of an era. In his campaign, the President-to-be took to the limit the philosophy of the (older) baby boomers that you can have it all, that nothing is unaffordable, that you need this new credit card (or second home, or third car, or fourth holiday), that these subprime mortgages are safe (honestly), that you really must meet my friend, Bernie Madoff.

Well, the global debt party is now emphatically over, and we have only started to clear up the mess. In 2008, it was the banks, and the collapse of Lehman Bros. In 2011, it is the debts and structural deficits of the great industrial nations, specifically those tied together by the currency union of the euro.

Against such a backdrop, Osborne's unflinching realism seems very much of its time. And, as he spelt out what it all meant, something like an early outline of "Osbornism" began to emerge through the pea-soup fog of gloom. On the public sector, as we have seen, he was unambiguous. The end of national pay-bargaining, for instance, would be - if achieved - a huge change to the culture of our public services. The NHS retains the special status it has always enjoyed for the Cameroons, permitted to keep all savings achieved by pay restraint. A similar exemption will be granted to the schools budget - further evidence of the growing importance of the Osborne-Gove axis, and of the Chancellor's belief that educational reform is the best supply-side measure a government can take. But there was a gruffness in Osborne's remarks on the public sector that marked a break with the soothing tones of the early Cameroon era.

There was a new flavour, too, to the Chancellor's announcement that he would not allow the international development budget to overshoot the UN target of 0.7 per cent of national income. It was Osborne, after all, who introduced Jeffrey Sachs, author of The End of Poverty, to the Conservative élite, gave the Columbia University professor dinner at his home, enthused about the possibilities of "One World Conservatism". The Chancellor has not ditched his manifesto commitment on international aid. But he has signalled more clearly than ever before that, as on climate change policy, Britain will honour its commitments but not go out on a limb. "We are not going to save the planet," he declared yesterday, "by shutting down our steel mills, aluminium smelters and paper manufacturers." The Tory modernisers have come a long way since Cameron hugged huskies and wore recycled trainers.

Plan A has not been ditched. But the texture and complexion of politics have altered dramatically. Osborne, an obsessive student of political history, knows that bad economic news is not always bad political news. More than ever, the spoils go to the realist, to the man with the plan, to the party that looks as if it knows what it is doing. As long as Ed Miliband and Ed Balls insist that the answer to borrowing too much is to borrow even more, that party will not be Labour. For now, the threat lies elsewhere. Like the rest of us, Osborne looks down at the "dreadful cauldron" of his own Reichenbach Falls, the deadly swirl of the global economy - and braces himself for the plunge.